Intangible Assets

You mean ‘freebies’.Yes, I’m talking of the ‘freebie’ handouts of everything from TV sets to mixies to grinders to laptops to bicycles. Many of these have been derided by conservative economists and c...

How to value intangible assets like brands, data and algorithms is a growing issue with investors and a knotty problem for accounting rule makers as companies rely on such assets more in marketing and product development.

Bellevue Group reports improved operating performance in the first half of
2015, extraordinary impairment of intangible assets
Bellevue Group AG /
Bellevue Group reports improved operating performance in the first half of 2015,
extraordinary...

Innovation is held back by the gap between the old financial system, investing and lending primarily against hard assets, and the new knowledge economy that depends on intangible assets. A new type of bank could benefit SMEs seeking to develop...

Intangible Assets are non-physical assets on a company's balance sheet

Intangible assets are assets that cannot be physically seen or touched. In general this includes things like intellectual property (such as patents and trademarks), brand recognition, and trade secrets. On the balance sheet, intangible assets add to the total asset value and, as such, are a component of the total book value.

While the value of intangible assets is harder to calculate than physical assets such as equipment or factories, intangibles have no less real value than their physical counterparts. There are several methods used in calculating the value of intangible assets, all of which rely on an accountant or accountants' estimates of worth.

In most cases, GAAP does not allow internally generated intangibles to show up on the balance sheet. For example: Coco-Cola corporation would not list the value of its brand on its balance sheet. On the other hand, if a company pays more than the fair value to acquire another company, the difference is shown as goodwill in the acquirer's balance sheet. Also, research-based companies, such as drug-manufacturers, are allowed to capitalize their research and development expenses -- since, in theory, research provides value long after it has been completed.

Some intangibles are amortized, i.e. written off, as expense over time. Under the U.S. GAAP goodwill cannot be written off as expense unless the company has a reason to believe that it has reduced in value. Amortization of intangibles decrease income of the company and hence offer tax benefits.

It should be noted that goodwill, while technically itself an intangible asset, can be listed separately on the balance sheet. In other words, a balance sheet may list intangible assets and goodwill separately or together.